NYMEX, How China’s Economic Effect Brent Oil Prices

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  • NYMEX, How China’s Economic Effect Brent Oil Prices

Chinese stock markets have been very volatile, closing early twice this week. The Shanghai Composite Index stopped trading after about 30 min because a new safeguard mechanism to limit volatility was triggered. Chinese stock markets also halted early on Jan. 4 for similar reasons.

Trading volumes were thin and there was no official settle for U.S. crude as U.S. markets were closed for the Martin Luther King Jr. Day holiday.

Oil prices have dropped by more than half since June as output around the world soared while demand growth slowed. Although the International Energy Agency (IEA) said last week a reversal in the trend was possible this year, it notedprices may fall further before rising.

Crude oil prices for February delivery plunged to settle $2/bbl lower on the New York market Jan. 6 while Brent prices settled $2.19/bbl lower in London. Analysts blamed falling prices on signs of an economic slowing in China, a major oil consumer.

Other factors behind oil price volatility included tensions between Saudi Arabia and Iran as well as growing US gasoline supplies.

Douglas-Westwood (DW) researcher Katy Smith said tensions between Saudi Arabia and Iran also are being closely followed by world oil traders and analysts.
Saudi Arabia said it is severing diplomatic ties with Iran after recent attacks on the Saudi Arabian embassy in Tehran in response to the execution in Saudi Arabia of a prominent cleric.

Iraq pumped a record 4 million barrels per day (bpd) of oil in December, Oil Minister Adel Abdel Mehdi said on Sunday, as output rose from its southern terminals and supply from the north surged.

Iran's oil minister Bijan Zanganeh said on Monday consultations with other members of producer group OPEC to stop oil prices falling had yet to bear fruit, but Tehran had no plans to call an emergency meeting to discuss prices.

DW expects total oil production in Saudi Arabia to increase steadily over 6 years, reaching more than 12.1 million b/d in 2021. Following the signature of the Joint Comprehensive Plan of Action agreement in July 2015, and anticipated removal of international sanctions, Iran plans to increase its oil export volumes.

On Jan. 6, the Energy Information Administration reported US commercial crude oil inventories, excluding the Strategic Petroleum Reserve, decreased by 5.1 million bbl for the week ended Jan. 1 from the previous week.

Prices found some support from a drop in U.S. drilling rigs, signifying a likely fall in future production. In a note to clients, Commerzbank analysts said latest figures from oilfield services company Baker Hughes showed the rig count hit its lowest level since October 2013.


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